The Impact Of Our Audit Market Concentration On Audit Quality

Audit market abroad is in high concentration with high audit quality. Government and scholars in America are anxious about the development without any inspections. Comparing with that, our audit market is still in low concentration with low quality. Government and associations make policies to moderate the concentration. Therefore, it is necessary to do empirical research on the relationship between our audit market concentration and audit quality to lay the foundation for all sides.This paper consists of6parts. Except Part0and Part5, other4parts are critical for it. Part1describes the theory of change of the relationship between audit market concentration and audit quality, and then it defines the meaning of audit market concentration. After that, it reveals the influence on audit quality which is brought by low, moderate and high audit concentration respectively. Part2does research on our audit market concentration based on client’s assets, revenue and a comprehensive index. It brings the conclusion that our audit market is in low concentration with low quality. Part3is empirical research on the relationship between audit market concentration and audit quality. It uses SPSS to do statistics analysis in descriptive statistics, P Index verification and signature verification. The result supports our hypothesis. Part4gives some advice on how to improve our audit market concentration moderately.This paper teases relevant literature home and abroad and gets the conclusion that they were related and unrelated to the subject. And it also composes a model in order to measure our audit market concentration which is low concentration.And then it also did descriptive statistics, P Index verification and signature verification. The result supports our hypothesis.The main research findings are:(1) A new comprehensive index model is created to measure the degree of concentration of audit market. Focusing on two indices--he number of clients’assets and revenue, a comprehensive index model is built by using multiply regression analysis to determine the weight coefficient of each index; the results from the comprehensive index model suggests the very low concentration of Chinese audit market:CR430.53%and CR850.97%; Compared with single index models, the comprehensive index model can reflect the accounting firm’s market strength more correctly.(2) The features of the audit market with low concentration are analyzed through the empirical analysis. These include:unfair competition and audit services of low-quality but high-cost exist; major accounting firms are attracting more quality clients, so the audit risk for small and medium-sized accounting firms is higher than before; and small and medium-sized accounting firms achieve rapid business growth through mergers.(3) Some recommendations on policies are proposed to improve low concentration to moderate concentration. The policymakers should embrace the concept of moderate concentration, and regulate the accounting firms with hierarchy:Major accounting firms should grow to be bigger and stronger by mergers, and small and medium-sized accounting firms should develop non-audit services to achieve self-development. The governments should play a leading role in the process toward moderate concentration of audit market.